2010 paid-search market back up and running

A report from SearchIgnite finds that Google leads the way with Bing-Yahoo on the rise

Bing is hot, Google is hotter, and Yahoo is cold, according to a report on the paid-search market that was published Tuesday. The data was compiled by SearchIgnite, a provider of search optimization solutions, which tracked over 55 billion ad impressions and one billion clicks on Google, Yahoo, and Bing between January 1, 2006 and September 30, 2010.

Overall paid search spend (a.k.a. money spent on search engine ads) increased 5.8% year-over-year, seeing a 4.9% increase in July, 5.8% in August, and 6.7% in September. The upward trajectory promises solid momentum for the fourth quarter, which is a pretty marked improvement compared to this time in 2009, when paid search spend fell 4.5% in the third quarter.

The most significant growth has been seen by Bing, which is up 21% in year over year spend growth, but its market share gains are not quite as impressive, claiming only 6.4% of the market in 2010’s third quarter, up from 6.2% in the second quarter. By comparison, Yahoo, which experienced pronounced decline in search ad spend in the third quarter (-10%), commands 13.4% of the market, down from 15.4% in the second quarter.

Yahoo’s search ad spend dropped precipitously in the third quarter, which SearchIgnite attributes to the recently sealed Yahoo-Bing alliance, which has produced more click-through rates for ads on the combined Bing-Yahoo inventory than previously seen by the companies individually, which means that Bing’s search algorithm is more effective at delivering relevant ads on Yahoo’s search results pages than Yahoo is.

Prior to the alliance, which began integration testing in July 2010, the click-through rates for Bing and Yahoo were 2.4% and 1.8% respectively. By September, Bing’s click-through rate increased 9% and cost-per-click rose from $.53 to $.55. SearchIgnite reports:

“The net result for advertisers is that early indications show the Bing ad serving technology is more effectively driving clicks from the Yahoo! audience than Yahoo‘s ad serving technology. This means that the scale of total clicks (and spend) coming from the combined Yahoo/Bing audience should increase, regardless of CPC changes, assuming these early trends hold.”

But the indomitable ruler remains Google, which claims 80.2% of all pay-per-click ad spend in the third quarter, and continues to grow. Google’s market share is up two percentage points from 2010’s second quarter, representing 7.9% year over year growth, which SearchIgnite says is the largest market share commanded by Google since SearchIgnite began tracking search engine market data.

“A jump of this size in a single quarter is very significant and marks the largest QoQ increase for Google since Q1 2009,” the SearchIgnite authors reported.

Google is expected to report an 18% increase in year-over-year net revenue growth this quarter, according to a report from Citigroup.